Two part tariff pricing rule

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Reference no: EM13838159

You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. The demand of each potential customer of SC is Q=10-P, where Q is in million of seconds per month. The marginal cost to SC of additional computing is 2 cents per second. What rental fee and usage fee should SC charge in order to maximize its profits (two part tariff pricing rule)? How much deadweight loss is generated by this pricing plan?

Reference no: EM13838159

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